MADRID, Jan 29 (Reuters) - Spain's unemployment rate hit a nearly 12-year high of 18.8 percent in the fourth quarter of 2009 and is expected to climb further this year as billions of euros in anti-crisis spending winds down.

The unemployment data for the last three months of last year reported on Friday was up from 17.9 percent in the third quarter and compared to 18.5 percent expected by economists polled by Reuters.

The number of Spaniards out of work rose by 203,200 to 4.3 million people in the same period, the data from the National Statistics Institute showed.

Joblessness is now nearing the 19.4 percent reached in 1998, a figure analysts expect to be surpassed.

"The rate is going to increase to 20 pct but not that fast. The pace of the increase will not be as fast as last year," said Giada Gianni of Citigroup.

The higher-than-expected figure came ahead of a government plan to slash spending, to be detailed later on Friday, to bring the public sector deficit down to 3 percent of gross domestic product by 2013.

Separately, flash consumer price data showed European-Union harmonised inflation was 1.1 percent in January from a year earlier, the third consecutive positive figure after high energy prices in 2008 lead to 8 straight months of falling prices.

Sluggish economic growth will keep Spanish price rises down over the next few months, though inflation pressures will return after the government introduces a 2-percent hike in value-added tax in July, analysts believe.

Spain's EU-harmonised figure comes just hours before inflation for the whole euro zone, with economists expecting prices to have risen 1.2 percent in January, up from 0.9 percent in December.

"Strong fuel prices in January have pushed inflation up on the previous month, but that has been offset by very high fuel prices in January of last year, so there have been some favourable base effects from that," said economist at RBS Nick Matthews.

"These figures are no surprise and are consistent with what is expected from the euro region flash later on today." (Additional reporting by Judith MacInnes; Editing by Andy Bruce)

Jan. 5 (Bloomberg) -- Spanish registered unemployment rose to the highest in more than a decade in December, capping a year that saw the nation’s jobless rate soar to double the euro- region average.

The number of people registering for unemployment benefits increased by 54,657, or 1.41 percent, from November to 3.92 million, the most since at least 1997, the earliest year for which comparable data are available. From a year earlier, unemployment climbed by 25 percent, the Labor Ministry in Madrid said today.

Spain’s jobless rate has jumped to 19.3 percent, according to European Union data, and the International Monetary Fund forecasts that it will rise above 20 percent this year. While the euro-area economy will probably expand in 2010, Spain’s government expects a full-year contraction as the real-estate market works through an excess of at least 1 million unsold homes and households pay down debt.

Government stimulus measures that helped to create more than 400,000 jobs were due to wind down at the end of last year. A project to spend 8 billion euros ($11.6 billion) on public infrastructure projects will be replaced this year by a fund half that size.

Unemployment in Spain compares with a euro-area average of 9.8 percent in October, according to the most recent EU data. Youth unemployment is more than 40 percent.

The increase in joblessness is eroding support for Prime Minister Jose Luis Rodriguez Zapatero’s Socialist Party. The opposition People’s Party would win 43.6 percent of the vote if elections were held now, compared with 38.5 percent for the Socialists, according to a poll by Sigma Dos published by El Mundo newspaper on Jan. 2.

Corruption has a long tradition in Spain. But lately, the country has experienced an explosion of scandals.

Hundreds of mayors and other officials across the country are being investigated for bribery and influence peddling, and police have seized assets worth billions of dollars. The government and the opposition agree that things have to change.

Boadilla del Monte, a small hill town about a half-hour west of Madrid, has achieved notoriety in Spain because of its former mayor, Arturo Gonzalez Panero. He was forced to resign earlier this year after being implicated in an influence-peddling network that extended to Madrid, Valencia and the Costa del Sol. A court in Madrid has frozen millions of dollars of his assets.

Nieves Castillejo used to work for a catering firm that handled parties in the mayor's home.

"There was more money there than a mayor should be earning," she says. "You could see it in the paintings, the statues and in the catering itself — like caviar and other things."

Castillejo says the corruption was an open secret in the town.

"We knew it smelled like fish, but we didn't realize the scope," she says.

Boadilla del Monte is just one of many Spanish municipalities tainted by scandal. According to the Interior Ministry, nearly a thousand people have been arrested in anti-corruption probes in the past five years. Police have seized assets worth more than $4 billion, including artworks, luxury cars and hundreds of prize fighting bulls.

Many of the scandals revolve around the concession of building permits. During the past decade, Spain was the focus of one of Europe's biggest housing booms. Rezoning a plot of land for construction could multiply its value many times over.

In Valencia, politicians also got money and gifts in exchange for contracts to organize public events, including Pope Benedict XVI's visit to the city in 2006.

The firm that was subcontracted to televise the Mass led by the pope allegedly diverted more than 2 million euros in illegal gains, according to the newspaper El Pais.

Images on television news shows of police arresting mayors or other local government officials have become almost a daily ritual of late.

Political science professor Manuel Villoria says the many years of the Franco dictatorship, which lasted from 1939 to 1975, left Spaniards distrusting the political system. Favoritism persists because many people rely on contacts, or enchufes as they are called in Spanish, to get things done.

"Even judges call me and ask, 'Hey, why didn't such-and-such student get admitted to your university? Can't you do something about it?' " says Villoria, a board member of the Spanish chapter of Transparency International, a nongovernmental organization that promotes honest government.

"Even judges! That's how pervasive it is in our culture," he adds.

But politicians at the national level worry about the bad rap their parties are getting as a result of the scandals. The ruling Socialists and opposition conservatives plan to propose a new local administration law this spring. Experts say that for anything to really change, the law would have to rein in the nearly dictatorial powers that many Spanish mayors still enjoy.

The nation's top hams - the world-renowned jamon Iberico - were traditionally given away in corporate gift hampers to employees and favoured clients but the practice greatly diminished this season as companies struggle to survive the recession.

The industry estimate sales of the traditional cured leg of Iberian pig could be down as much as 20 per cent during the festive season, a period which usually accounts for more than 60 per cent of annual revenue for ham producers.

With an estimated four million hams unsold, the gourmet foodstuff is almost being given away.

Hams have become the most popular promotional gift being offered free to Spaniards who purchase a Caribbean cruise, open a new savings account or even purchase a one-way ticket with a budget airline.

Spain's pig farmers fear the nation's austerity during the economic crisis has coincided with years of excessive production culminating in an unwanted ham mountain.

Julio Revilla, chairman of the meat industry association Iberaice, said the boom years of Spanish ham production had created a bubble much like that in the nation's property sector.

"On the basis of easy credit and thanks to permissive legislation that treats all types of ham equally, many people, including many real estate investors, got into the business, and production increased massively," he told the newspaper El Pais.

The ham market had become saturated by lesser quality products, he said, with about 6.5 million legs of grain-fed Iberian pigs offered on the market in 2009 compared with 1.5 million a decade ago.

Although the top-quality jamon belota from the acorn-fed pure-bred Iberian pigs still commands a high price, the cost of lesser quality hams has halved in the past 12 months.

The glut of jamon follows a similar crisis in the foie gras industry in France. Last month producers gave away 14 tons of the delicacy to charity after hugely overestimating the demand at Christmas.